Modul Matrikulasi

Program Doktor Ilmu Manajemen

Universitas Brawijaya

DISTRIBUTING
PRODUCT
Chapter X
 ➔ CHANNEL OF ➔ SELECTING THE
DISTRIBUTIONS
DEGREE OF MARKET
COVERAGE

➔ SELECTING THE ➔ HOW TO

TRANSPORTATION ACCELERATE THE
Table USE TO DISTRIBUTE DISTRIBUTION
of PRODUCTS PROCESS
Content
➔ BACKGROUND ON ➔ BACKGROUND ON
RETAILERS WHOLESALERS

➔ VERTICAL CHANNEL
INTEGRATION
Concept of Distributing Product

Highlights
● Firms regularly engage in promotion, which
is the act of informing or reminding
Consumers about a specific product or
brand. They can use promotion to Increase
the demand for the product and thereby
increase the value of the firm.
 Channels Of Degree of Market Transportations to Accelerate Distributions
Distribution Coverage Distribute Product Process
Retailers Background ...

Channel of Distributions
A firm’s distribution decision determines the manner by which its products are made accessible to its
customers. Firms must develop a strategy to ensure that products are distributed to customers at a place
convenient to them.
3 Distributions Channel

Direct Channel One-level Channel Two-level Channel

 Channels Of Degree of Market Transportations to Accelerate Distributions
Distribution Coverage Distribute Product Process
Retailers Background ...

Channel of Distributions Direct Channel

ADVANTAGES DISADVANTAGES

● price paid by the consumer

directly goes to the producer
Direct Channel ● manufacturers that use a
● Avoid marketing
direct channel need more
intermediaries
When a producer of a employees.
product deals directly ● Allows the company to
with customers, ● Incurring more expenses to
maintain, monitor, and update
marketing intermediaries promote the product.
a customer database that can
are not involved; this
situation is called a be used to shape the future
direct channel. product offerings
 Channels Of Degree of Market Transportations to Accelerate Distributions
Distribution Coverage Distribute Product Process
Retailers Background ...

Channel of Distributions One-level Channel

EXAMPLE

PRODUCER

One-level Channel
RETAILER A RETAILER B

In a one-level channel, one

marketing intermediary is
between the producer and CONSUMER CONSUMER CONSUMER CONSUMER
the customer. Marketing
intermediaries become
owners of the products and
then resell them.
 Channels Of Degree of Market Transportations to Accelerate Distributions
Distribution Coverage Distribute Product Process
Retailers Background ...

Channel of Distributions Two-level Channel

EXAMPLE PRODUCER

WHOLESALE
R

Two-level Channel RETAILER A RETAILER B

Some products go CONSUMER CONSUMER CONSUMER CONSUMER

through a two-level
channel of distribution,
in which two marketing Benefits for SMSe
intermediaries are ● Small businesses are not well known, they may not receive orders from retail outlets.
between the producer Therefore, they rely on agents to sell the products to retailers. A small business that
and the customer. creates only a few products may have a much better chance of succeeding if it can
convince a large retailer to carry its products.
 Channels Of Degree of Market Transportations to Accelerate Distributions
Distribution Coverage Distribute Product Process
Retailers Background ...

Factors That Determine the Optimal Channel of Distribution

Ease of Transporting Degree of Standardization Internet Orders

If a product can be easily Products that are standardized Firms that fill orders over the
transported, the distribution are more likely to involve Internet tend to use a direct
channel is more likely to intermediaries. When channel because their website
involve intermediaries. If the specifications are unique for serves as a substitute for a
product cannot be each consumer, the producer retail store.
transported, the producer may must deal directly with
attempt to sell directly to consumers.
consumers.
 Channels Of Degree of Market Transportations to Accelerate Distributions
Distribution Coverage Distribute Product Process
Retailers Background ...

Selecting The Degree Of Market Coverage

Intensive Distribution Selective Distribution Exclusive Distribution

Intensive distribution is used to Selective distribution is used to With exclusive distribution, only
distribute a product across most distribute a product through one or a few outlets are used. This
or all possible outlets. Firms that selected outlets. Some outlets are is an extreme form of selective
use intensive distribution ensure intentionally avoided. For distribution. For example, some
that consumers will have easy example, some specialized luxury items are distributed
access to the product and achieve computer equipment is sold only exclusively to a few outlets that
a high degree of market coverage at outlets that emphasize cater to very wealthy consumers.
for all types of consumers computer sales because some By limiting the distribution, the
expertise may be necessary. firm can create or maintain the
prestige of the product.
 Channels Of Degree of Market Transportations to Accelerate Distributions
Distribution Coverage Distribute Product Process
Retailers Background ...

Advantage &
Selecting The Degree Of Market Coverage Disadvantage

Advantages Disadvantages

Intensive Distributions Gives consumer easy access Many outlets will not accept some
product if consumers are unlikely to
purchase those products there

Selective Distributions The Distributions is focused on outlets where Since the distributions is selective, the
demand for the product and/or the employees products are not accessible as they
have expertise to sell their products would be if intensive distributions
were used

Exclusive Distributions The Distributions is focused on few outlets, so The product’s access to customers are
the product are perceived as prestigious. Also limited.
producers that the outlets able to services the
products properly
 Channels Of Degree of Market Transportations to Accelerate Distributions
Distribution Coverage Distribute Product Process
Retailers Background ...

The Influence of
Selecting The Degree Of Market Coverage Marketing Research

Market Research Example

● How Marketing Research Can
Influence the Market Coverage
Decision. Marketing research can
help a firm determine the optimal
type of coverage by identifying
where consumers desire to ● Nike has used marketing research to determine the types
purchase products or services. A of outlets where it may be able to sell its shoes. When
firm may attempt to get customer research showed that Foot Locker attracts teenagers who
feedback before it determines its are often willing to spend at least $80 on shoes, Nike
market coverage. decided that Foot Locker was a feasible retail outlet for
its shoes.
 Channels Of Degree of Market Transportations to Accelerate Distributions
Distribution Coverage Distribute Product Process
Retailers Background ...

Selecting The Transportation Use To Distribute Products

The cost of transporting some products can exceed the cost of producing them. An inefficient
form of transportation can result in higher costs and lower profits for the firm. For each form of
transportation, firms should estimate timing, cost, and availability. This assessment allows the
firm to choose an optimal method of transportation. The most common forms of transportation
used to distribute products are truck, rail, air, water, and pipeline.

Example
Before After Output
Now it immediately sends its
Toyota usually let finished cars finished vehicles by rail to a Consequently the cars no
sit until it had a large batch to sorting dock, where they are longer sit at the factory.
send by rail to a specific city. sorted and then delivered to This process has reduced the
various cities nearby distribution time by two
days.
 Channels Of Degree of Market Transportations to Accelerate Distributions
Distribution Coverage Distribute Product Process
Retailers Background ...

long distribution
How To Accelerate The Distribution Process effect

The structure of a firm’s distribution system affects its performance. A

lengthy distribution process has an adverse effect.
3 Ways to Accelerate
Distributions Process

Streamline the Channels of

Distribution
Longer Time Low Investment
Turnover

products will take longer to Slow distribution process will Use of the Internet for
reach customers, which affect to lengthy period from Distribution
may allow competitors to the time the firm invests funds
supply products to the to produce the product until it
market sooner. receives revenue from the sale
Integrate the Production and
of the product.
Distribution Processes
 Channels Of Degree of Market Transportations to Accelerate Distributions
Distribution Coverage Distribute Product Process
Retailers Background ...

How To Accelerate The Distribution Process Streamline

Streamline the Channels of Distribution

Previous Distributions Resctructured Many firms are attempting to streamline the channels of
Process Distributions Process
distribution so that the final product reaches customers
Distribution Center Distribution Center more quickly. This restructuring has removed one
level of the distribution process. Restructuring a
distribution process commonly results in the elimination
of warehouses.
Regional Warehouse
● When products are light and can be easily
delivered by mail to customers.

● warehouses may not be needed. Heavy products,

Customers Customers
however, cannot be easily delivered by mail, so
warehouses are necessary.
 Channels Of Degree of Market Transportations to Accelerate Distributions
Distribution Coverage Distribute Product Process
Retailers Background ...

How To Accelerate The Distribution Process Internet Usage

Use of the Internet for Distribution

Using Internet for Distributions help firms to reach out
customers more effective. Companies can providing
product information on websites so that customers can
compare prices and quality of products.

Amazon.com and Dell, Inc., are examples of companies that

sell their products directly to customers without using retail
stores, so they can improve their efficiency. They may be able
to sell their product at a lower price as a result. Another
significant change occurs in firms’ relationships with suppliers
and freight haulers. A web of communication allows for
increased collaboration and the creation of a partnership
in the production chain.
 Channels Of Degree of Market Transportations to Accelerate Distributions
Distribution Coverage Distribute Product Process
Retailers Background ...

How To Accelerate The Distribution Process Integrating

Integrate the Production and Distribution Processes

The distribution process can also be accelerated by improving
its interaction with the production process.

Integrating productions and distributions processes help

companies to decrease distributions times, reduce product
stock in the warehouse, and also accelerate the fulfillment of
the needs of retailers and wholesalers

This figure will showed you how to integrate the production

and distribution process, so companies can distribute their
product more effective and efficient
 Channels Of Degree of Market Transportations to Accelerate Distributions
Distribution Coverage Distribute Product Process
Retailers Background ...

Background On Retailers

Retailers serve as valuable intermediaries by distributing products directly to customers. One of

the most successful retailers in the world is Wal-Mart

Retailer Characteristic

Number of Quality of Variety of Store vs non

Outlets Services products offered store
An independent retail store has A full-service retail store A specialty retail store specializes Although most retailers use a
only one outlet, whereas a chain generally offers much sales in a particular type of product. store to offer their service,
has more than one outlet. assistance to customers These stores tend to focus on only others do not. The three most
Although there are more and provides servicing if one or a few types of products but common types of nonstore
independent stores than chain needed. Some products are have a wide selection of brands retailers are mail-order
stores, the chain more appropriate for full available. Retail store offers retailers, websites, and
stores are larger on average. service than others. numerous types of goods. vending machines.
 Degree of Market
Accelerate Distributions
Transportations to Accelerate Distributions Vertical Channel
. . .Channels Of
Transportations to
Distribute Product Coverage
Distribution
Retailers Background
Process Distribute Product
Wholesaler Background
Process
Retailers Background ...
Integration

Background On Wholesaler

Wholesalers are intermediaries that purchase products from manufacturers and sell them to retailers. They are
useful to both manufacturers and retailers, as explained next

Wholesalers offer five key services to

Manufacture Retailers
 Degree of Market
Accelerate Distributions
Transportations to Accelerate Distributions Vertical Channel
. . .Channels Of
Transportations to
Distribute Product Coverage
Distribution
Retailers Background
Process Distribute Product
Wholesaler Background
Process
Retailers Background ...
Integration

Background On Wholesaler Manufacture

Warehousing
5 Key Services Offer Wholesalers purchase products from the manufacturer in bulk and maintain these
products at their own warehouses.
Sales
Wholesalers use their sales expertise when selling products to retailers.retailer’s
decision to purchase product due to the wholesaler’s persuasion
Delivery
Wholesalers are responsible for delivering products to various retailers.Therefore,
manufacturers do not need to be concerned with numerous deliveries.
Credit Risk
wholesaler purchases the products from the manufacturer and sells them to
Manufacture retailers on credit. So,manufacturer doesn’t need to worry about retailer credit risk
Informations
Wholesalers often receive feedback from retailers and can provide valuable
information to manufacturers, such as new competing products that are being
sold in retail stores.
 Degree of Market
Accelerate Distributions
Transportations to Accelerate Distributions Vertical Channel
. . .Channels Of
Transportations to
Distribute Product Coverage
Distribution
Retailers Background
Process Distribute Product
Wholesaler Background
Process
Retailers Background ...
Integration

Background On Wholesaler Retailers

Warehousing
5 Key Services Offer Wholesalers may maintain sufficient inventory so that retailers can order small
amounts frequently.
Promotions
Wholesalers sometimes promote their products, and these efforts may increase
the sales of those products by retail stores.
Display
Some wholesalers set up a display of the products for the retailers. This is
important to retailers because they have a limited amount of space.
Credit
Wholesalers may offer credit to retailers for their products, providing a financing
Manufacture
Retailers option for retailers who may need to borrow funds for payment.
Informations
Wholesalers can inform retailers about policies made by other retailers regarding
product pricing, sales promotions, or store hours. Retailers can use this
information to set their own related policies.
 Degree of Market
Accelerate Distributions
Transportations to Accelerate Distributions Vertical Channel
. . .Channels Of
Transportations to
Distribute Product Coverage
Distribution
Retailers Background
Process Distribute Product
Wholesaler Background
Process
Retailers Background ...
Integration

Vertical Channel Integration Manufacture

Manufacturers may decide to vertically integrate their operations by establishing retail stores.
Manufacturers may consider opening its own retail shops if it can achieve higher sales by selling its
clothes through these shops.
Questions needed to answer before decide to implementing vertical channel integration

Can it absorb the cost of leasing store space and employing workers?

Can the firm offer enough product lines to make full use of a store?

Will the additional revenue to be earned cover all additional costs incurred?

Will the firm lose the business that it had developed with other retail firms once it begins to compete with
those firms on a retail level?
 Degree of Market
Accelerate Distributions
Transportations to Accelerate Distributions Vertical Channel
. . .Channels Of
Transportations to
Distribute Product Coverage
Distribution
Retailers Background
Process Distribute Product
Wholesaler Background
Process
Retailers Background ...
Integration

Vertical Channel Integration Retailers

Just as a producer may consider establishing retail outlets, a retailer may consider producing its own
products. This is the reverse of the previous example. Yet it also involves a firm that is considering vertical
integration
Questions needed to answer before decide to implementing vertical channel integration

Can it absorb the expenses resulting from production, including the cost of a production plant and new
employees?

Does it have the expertise to adjust the production process as consumer tastes change over time?

In General
the firm must decide whether the benefits from producing the
products itself are greater than the additional costs.